November 2, 2023 at 11:03 GMTModified date: November 2, 2023 at 11:04 GMT
November 2, 2023 at 11:03 GMT

Tether expands on BTC mining, issuing $610m debt financing to Northern Data

Stablecoin company Tether ($USDT) has issued a major debt facility to German-based BTC mining company Northern Data AG.

Tether expands on BTC mining, issuing $610m debt financing to Northern Data

Stablecoin company Tether ($USDT) has issued a major debt facility to German-based BTC mining company Northern Data AG. It has put in a total of €575 million, around $610m, in it.

Securing this chunk from Tether, Northern Data AG aims to drive further investments across its businesses. This includes investing in its three business lines that consists of its artificial intelligence cloud service provider Taiga Cloud, Ardent Data Centers and Peak Mining, the company’s mining business.

As per the official announcement, the debt facility is unsecured, at standard market conditions and has a term until 1 January 2030. The new investments will be utilised on the acquisition of additional hardware and scaling Bitcoin mining operations with liquid-cooling mining technology.

The move follows Tether’s recent acquisition of a stake in Northern Data. This happened in September 2023 when the stablecoin issuer put in an undisclosed amount in the mining company to back its AI initiatives.

In light of the legal action faced by Tether in the United States accusing it for not being fully transparent about its reserves, the company had clarified that its investment in Northern Data AG was separate from its reserves and would not impact customer funds.

The legal tribulations go back to October 2019 when a group of investors filed a lawsuit alleging that Tether and cryptocurrency exchange Bitfinex engaged in market manipulation by issuing $USDT.

They claimed that the stablecoins were not backed by the US dollar and the two companies had the intention of using them to purchase volatile cryptocurrencies such as Bitcoin. While both Tether and Bitfinex have denied the allegations, the case resulted in millions of dollars in fines and orders to provide reports on $USDT’s backing.

Back in July, the former announced that it has strengthened its reserves by injecting an additional $850 million. This brought its total excess reserves to $3.3 billion at the end of Q2 2023, reflecting the team’s focus on stability and transparency. Clarifying that the excess money added to the reserves constitutes profits not distributed to shareholders, the report said: “As a reminder, excess reserves are the company’s own profits – not distributed to shareholders and which the company has decided to keep on top of the 100% reserves that Tether maintains to back all the outstanding tokens.”

Off late, Tether has been seen making strides in Bitcoin mining operations. It has already launched its mining arm in South America’s Uruguay nation, followed by unveiling a mining software to enhance the efficient management of mining capacity. The company had also revealed its intention to allocate a specific portion of its monthly profits toward acquiring BTC.

In its recently released attestation report for the third quarter of 2023, Tether announced a new milestone of hitting the highest percentage ever of its reserves held in cash and cash equivalents (C&Ceq).

This percentage stood at an impressive 85.7%. A vast majority of these C&Ceq are in the form of US T-Bills, which account for $72.6bn. This figure includes both direct and indirect exposure to US T-Bills.

Its CEO, Paolo Ardoino, said in a statement: “We’ve achieved the highest ever percentage of our reserves held in Cash and Cash Equivalents, signalling our dedication to maintaining liquidity and stability within the stablecoin ecosystem…..Tether’s Q3 attestation is a testament to our unwavering commitment to transparency, stability, and responsible financial management.”

Ardoino, who had been serving as Tether’s chief technology officer since 2017, took over the top position in early October. He continues to retain his role as the chief technology officer at Tether’s sister company – Bitfinex and chief strategy officer of Holepunch after the promotion at Tether.